Mitsui O.S.K. Lines (MOL), Nippon Yusen K.K. (NYK Line) and Kawasaki Kisen Kaisha (“K”Line) have announced they plan to establish a new joint-venture company to integrate their container shipping businesses (including worldwide terminal operating businesses excluding Japan). The companies’ terminal operations in Japan and other businesses, such as bulk shipping, ferries and logistics will not be merged. The merger is subject to regulatory approval from the authorities.
In a joint statement they said, “The three Japanese companies have made efforts to cut cost and restructure their business, but there are limits to what can be accomplished individually.” They cited low oil-prices, sluggish cargo demand, and over-supply of trade capacity as reasons for why the decision was made to merge the container businesses.
The three companies claim that, “The new joint-venture company is expected to create a synergy effect by utilizing the best practices of the three companies. And by taking advantage of scale merit of its vessel fleet totaling 1.4 million TEUs, realize integration effect of approximately 110 billion Japanese Yen annually and seek swiftly financial performance stabilization.”
|Overview of the joint venture:|
|Kawasaki Kisen Kaisha, Ltd. 31%
Mitsui O.S.K. Lines, Ltd. 31%
Nippon Yusen Kabushiki Kaisha 38%
|Approx. 300 Billion JPY (Including fleets, share of terminals as investment in kind)|
|Business Domain||Approx. 300 Billion JPY (Including fleets, share of terminals as investment in kind)|
||Approx. 1.4 Million TEU*, 6th in the market with approx. 7% of global share
Notes1) Figures are as of October, 2016 excluding order book. Notes2) Source: Alphaliner
Establishment of the new joint-venture company is planned for July 1st, 2017 with business commencement planned by April 1st, 2018. Until this date the companies will continue to serve as independent operators.
This latest announcement follows a pattern of M&A in the liner shipping industry. The impact this will have on pricing and on the industry as a whole is highly debated. Odyssey continues to monitor global ocean container markets on several levels and will be sure to provide updated information as it becomes available. If you have any questions surrounding your specific business please reach out to your Odyssey representative, we are more than willing to discuss the implications of this with you.